You
know that amazing feeling when you go to bed knowing you've finished
all your work for the day? Yeah, neither do I. Subprime or jumbo lenders
are never finished either. "Wall Street Finds New Subprime with Brokers Pitching 125% Loans." And here's an article in the Wall Street Journal about trends in retail jumbo lending.

On the jobs and branch expansion front, in the west Bay Equity is expanding. Bay Equity
is a family owned mortgage bank that is headquartered in San Francisco,
CA. "We are an agency direct lender that ranked #44 in the top 100
lenders in 2013. We are expanding our footprint and looking to add
additional production in key markets across the country. Bay Equity
offers a great culture with special focus on family values and
transparency. Our owners and top managers will be attending Mastermind
in Las Vegas 6/3 through 6/5 - if you are interested in learning more
about Bay Equity and attending the conference, please contact Casey
McGovern at casey@bayeq. com."

And in a different area of the nation, New Penn Financial is actively recruiting Account Executives for its Wholesale Division in the Southeast, Midwest, and Texas.
Founded in 2008, New Penn, one of the largest and most well-capitalized
independent mortgage bankers in the country, has forged a national
industry presence built on competitive interest rates, exceptional
customer service, and healthy lending practices. New Penn
is nationally licensed and originates both agency and non-agency loan
programs. Aside from a diverse product offering, New Penn Financial
focuses on providing AEs and wholesale clients, the tools, content, and
branding to ensure the development of new relationships while
strengthening the bonds of old. Experienced candidates with proven
success with sales in the wholesale channel should submit resumes to
Aubrie Cusumano at acusumano@newpennfinancial. com.

There
is a lot of industry banter about preferred lenders (mostly by
non-preferred lenders) and affiliated relationships (mostly by those not
in an affiliated relationship). Those parties should be very interested
in a study on affiliated relationships by the Federal Reserve.
"The authors' findings indicate that homebuilder financing affiliates
do make loans to observably riskier borrowers, but the loans made by
homebuilders have lower delinquency rates than those made by
unaffiliated lenders, even when loan and borrower characteristics are
held constant. Read more."

Privacy is important, or at least until now.
Forget about drones, or about Google taking pictures of our houses for
street views or our backyards for Google Satellite, banks have very
serious privacy laws. Lenders do as well, and in sending out bid tapes,
for example, we were always careful to delete any identifiable
information such as social security numbers. But what has turned
industry heads is the expansion of the "National Mortgage Database Program" to include personally identifiable information.

Industry
observers were quick to point out that almost every other Rule has a
60-day comment period, whereas this one only offered 30 days. The
information in the database would be available without an individual's
permission or warrant or probable cause, to search and algorithm search
on an ongoing basis by any government agency or 'empowered' person. Here
is one newspaper's take on the program: WashingtonPost. "As
many as 227 million Americans may be compelled to disclose intimate
details of their families and financial lives -- including their Social
Security numbers -- in a new national database being assembled by two
federal agencies. Critics also warn the new database will be vulnerable
to cyber-attacks that could put private information about millions of
consumers at risk. They also question the agency's authority to collect
such information.

"Earlier this year, Cordray tried to assuage concerned lawmakers during a Jan. 28 hearing
of Hensarling's panel, saying repeatedly the database will only contain
'aggregate' information with no personal identifiers. But under the
April register notice, the database expansion means it will include a
host of data points, including a mortgage owner's name, address, Social
Security number, all credit card and other loan information and account
balances. The database will also encompass a mortgage holder's entire
credit history, including delinquent payments, late payments, minimum
payments, high account balances and credit scores, according to the
notice. The two agencies will also assemble 'household demographic
data,' including racial and ethnic data, gender, marital status,
religion, education, employment history, military status, household
composition, the number of wage earners and a family's total wealth and
assets."

Maybe they'll put the NSA in charge of fending off hackers, or the folks who were in charge of Target's IT system...

In the "lending space", over in Washington Metropolitan Mortgage has announced that it has joined Absolute Mortgage. But depository bank M&A also continues unabated
as weaker banks find stronger partners, and cost efficiencies are
sought. Simmons First National Corporation announced that it has entered
into a definitive agreement and plan of merger with Liberty Bancshares,
Inc. headquartered in Springfield, Missouri, including its wholly-owned
bank subsidiary Liberty Bank. According to the terms of the Agreement,
Simmons First National Corporation ("Company") will acquire all of the
outstanding common stock of Liberty in an all-stock transaction valued
at approximately $206.9 million, subject to potential adjustments. First
Business Bank ($1.2B, WI) will acquire Alterra Bank ($211mm, KS) for
$30.1mm in cash (45%) and equity (55%) or about 1.57x tangible book. In
Illinois Pan American Bank ($222mm) will acquire Bank of Palatine
($52mm) for an undisclosed sum. Transportation Alliance Bank ($627mm,
UT) will acquire Anchor Funding Services LLC, which provides factoring
services to small businesses, for an undisclosed sum. In Minnesota ("The
star of the North") Eagle Bank is buying a branch from AmericanWest
Bank ($3.9B, WA). Eastern Virginia Bankshares, Inc., the bank holding
company for EVB, and Virginia Company Bank announced that EVBS, EVB and
Virginia Company Bank have entered into a definitive agreement and Plan
of Reorganization (the "Agreement") under which Virginia Company Bank
will merge into EVB, with EVB being the surviving bank, in a
mixed-consideration transaction with an aggregate deal value of
approximately $9.6 million.

But
Slavie Federal Savings Bank of Bel Air, Maryland, won't be playing
anymore. It was closed Friday, and the FDIC found nearby Bay Bank, FSB,
of Lutherville to step in.

The
Office of the Comptroller of the Currency is proposing to raise its
assessment rates on banks and savings associations with more than $40
billion in assets. Last month the OCC published a proposed rule
that would increase assessments on national banks and federal savings
associations with total assets over $40 billion. The OCC 's proposal is
such: to increase the
marginal assessment rate for such institutions by 14.5% beginning
September 30, 2014; specific assessments would range from 0.32% to 14%,
depending on the total assets of the institution as reflected on its
June 30, 2014 call report.
The average increase in assessments for covered institutions would be
12%. The OCC attributes the increased assessments to new supervisory and
regulatory initiatives that require additional resources, with most of
those resources allotted for large bank supervision and regulation. The
OCC notes it did not raise marginal rates on the assets of these
institutions between 1995 and 2013, and lowered marginal rates for these
institutions in 2008 when it added a new asset bracket for assets in
excess of $250 billion. Comments on the proposed rule are due June 12,
2014.

So
how are depository institutions doing so far this year? Not as good as
they have been in years prior. According to the FDIC, ccommercial
banks and savings institutions reported aggregate net income of $37.2
billion in the first quarter of 2014, down $3.1 billion (7.6%) from
earnings of $40.3 billion the industry reported a year earlier. The
decline in earnings was mainly attributable to a 10.7% decline in
noninterest income. Despite an overall growth in loan and lease
balances, income from mortgage-related activity remained well below the
level of a year earlier. Noninterest income from the sale,
securitization and servicing of mortgages was $4.0 billion (53.6%) lower
than a year ago. One- to four-family residential real estate loans
originated and intended for sale were $323.6 billion (70.6%) lower than
in the first quarter of 2013, as rising interest rates in the second
quarter of 2013 reduced the demand for mortgage refinancings.

The Federal Deposit Insurance Corporation released April's list of orders of administrative enforcement actions
taken against banks and individuals. The FDIC issued a total of 31
orders and one notice in April; the orders included: two consent orders;
two prompt corrective action directives; eight removal and prohibition
orders; three section 19 orders; one civil money penalty; one order
amending order to pay; 14 orders terminating consent orders and cease
and desist orders; and one notice.

Turning to the markets, although
we have a decent amount of market-moving news this week, let's not
forget last week's. U.S. April personal income rose 0.3%, core PCE, the
Fed's favorite measure of inflation, increased by 0.2% month-over-month
in April (or 1.4% year-over-year), the Chicago Purchasing Manager's
Index rose to 65.5 in May from 63.0 in April. And the University of
Michigan's Consumer Confidence final May reading came in at 81.9, down
from 84.1 the month before.

But
in spite of the strong news on Friday, economic data last week showed
that this year was off to a much weaker start than many anticipated -
mostly due to the contraction of the 1st
quarter's GDP. The good news is that more recent economic data continue
to suggest a more robust pace of GDP growth in the second quarter. And
we have a lot of news this week. Today is the ISM Manufacturing Index and Construction Spending. Tomorrow the 3rd
is Factory Orders, Wednesday is the ADP Employment Change and
International Trade numbers (providing insights on trends here and
abroad), along with Nonfarm Productivity and Unit Labor Costs, and the
release of the Fed's Beige Book. Thursday
is Initial Jobless Claims. But on Friday is the "Big Daddy" in the form
of all the employment data (the unemployment rate, nonfarm payroll,
hourly earnings).

For numbers, we saw a 2.46% close on the 10-year yield on Friday. This morning we're up to 2.50%, and agency MBS prices are worse about .125.
(The Ginnie 3% coupon, which is how 3.50% FHA & VA mortgages are
priced, has a par handle - meaning it is above 100.00. But we have those
darned mortgage insurance premiums, loan level price adjustments, and
margins due to increased overhead, all serving to push borrower costs
higher.)

You
know that amazing feeling when you go to bed knowing you've finished
all your work for the day? Yeah, neither do I. Subprime or jumbo lenders
are never finished either. "Wall Street Finds New Subprime with Brokers Pitching 125% Loans." And here's an article in the Wall Street Journal about trends in retail jumbo lending.

On the jobs and branch expansion front, in the west Bay Equity is expanding. Bay Equity
is a family owned mortgage bank that is headquartered in San Francisco,
CA. "We are an agency direct lender that ranked #44 in the top 100
lenders in 2013. We are expanding our footprint and looking to add
additional production in key markets across the country. Bay Equity
offers a great culture with special focus on family values and
transparency. Our owners and top managers will be attending Mastermind
in Las Vegas 6/3 through 6/5 - if you are interested in learning more
about Bay Equity and attending the conference, please contact Casey
McGovern at casey@bayeq. com."

And in a different area of the nation, New Penn Financial is actively recruiting Account Executives for its Wholesale Division in the Southeast, Midwest, and Texas.
Founded in 2008, New Penn, one of the largest and most well-capitalized
independent mortgage bankers in the country, has forged a national
industry presence built on competitive interest rates, exceptional
customer service, and healthy lending practices. New Penn
is nationally licensed and originates both agency and non-agency loan
programs. Aside from a diverse product offering, New Penn Financial
focuses on providing AEs and wholesale clients, the tools, content, and
branding to ensure the development of new relationships while
strengthening the bonds of old. Experienced candidates with proven
success with sales in the wholesale channel should submit resumes to
Aubrie Cusumano at acusumano@newpennfinancial. com.

There
is a lot of industry banter about preferred lenders (mostly by
non-preferred lenders) and affiliated relationships (mostly by those not
in an affiliated relationship). Those parties should be very interested
in a study on affiliated relationships by the Federal Reserve.
"The authors' findings indicate that homebuilder financing affiliates
do make loans to observably riskier borrowers, but the loans made by
homebuilders have lower delinquency rates than those made by
unaffiliated lenders, even when loan and borrower characteristics are
held constant. Read more."

Privacy is important, or at least until now.
Forget about drones, or about Google taking pictures of our houses for
street views or our backyards for Google Satellite, banks have very
serious privacy laws. Lenders do as well, and in sending out bid tapes,
for example, we were always careful to delete any identifiable
information such as social security numbers. But what has turned
industry heads is the expansion of the "National Mortgage Database Program" to include personally identifiable information.

Industry
observers were quick to point out that almost every other Rule has a
60-day comment period, whereas this one only offered 30 days. The
information in the database would be available without an individual's
permission or warrant or probable cause, to search and algorithm search
on an ongoing basis by any government agency or 'empowered' person. Here
is one newspaper's take on the program: WashingtonPost. "As
many as 227 million Americans may be compelled to disclose intimate
details of their families and financial lives -- including their Social
Security numbers -- in a new national database being assembled by two
federal agencies. Critics also warn the new database will be vulnerable
to cyber-attacks that could put private information about millions of
consumers at risk. They also question the agency's authority to collect
such information.

"Earlier this year, Cordray tried to assuage concerned lawmakers during a Jan. 28 hearing
of Hensarling's panel, saying repeatedly the database will only contain
'aggregate' information with no personal identifiers. But under the
April register notice, the database expansion means it will include a
host of data points, including a mortgage owner's name, address, Social
Security number, all credit card and other loan information and account
balances. The database will also encompass a mortgage holder's entire
credit history, including delinquent payments, late payments, minimum
payments, high account balances and credit scores, according to the
notice. The two agencies will also assemble 'household demographic
data,' including racial and ethnic data, gender, marital status,
religion, education, employment history, military status, household
composition, the number of wage earners and a family's total wealth and
assets."

Maybe they'll put the NSA in charge of fending off hackers, or the folks who were in charge of Target's IT system...

In the "lending space", over in Washington Metropolitan Mortgage has announced that it has joined Absolute Mortgage. But depository bank M&A also continues unabated
as weaker banks find stronger partners, and cost efficiencies are
sought. Simmons First National Corporation announced that it has entered
into a definitive agreement and plan of merger with Liberty Bancshares,
Inc. headquartered in Springfield, Missouri, including its wholly-owned
bank subsidiary Liberty Bank. According to the terms of the Agreement,
Simmons First National Corporation ("Company") will acquire all of the
outstanding common stock of Liberty in an all-stock transaction valued
at approximately $206.9 million, subject to potential adjustments. First
Business Bank ($1.2B, WI) will acquire Alterra Bank ($211mm, KS) for
$30.1mm in cash (45%) and equity (55%) or about 1.57x tangible book. In
Illinois Pan American Bank ($222mm) will acquire Bank of Palatine
($52mm) for an undisclosed sum. Transportation Alliance Bank ($627mm,
UT) will acquire Anchor Funding Services LLC, which provides factoring
services to small businesses, for an undisclosed sum. In Minnesota ("The
star of the North") Eagle Bank is buying a branch from AmericanWest
Bank ($3.9B, WA). Eastern Virginia Bankshares, Inc., the bank holding
company for EVB, and Virginia Company Bank announced that EVBS, EVB and
Virginia Company Bank have entered into a definitive agreement and Plan
of Reorganization (the "Agreement") under which Virginia Company Bank
will merge into EVB, with EVB being the surviving bank, in a
mixed-consideration transaction with an aggregate deal value of
approximately $9.6 million.

But
Slavie Federal Savings Bank of Bel Air, Maryland, won't be playing
anymore. It was closed Friday, and the FDIC found nearby Bay Bank, FSB,
of Lutherville to step in.

The
Office of the Comptroller of the Currency is proposing to raise its
assessment rates on banks and savings associations with more than $40
billion in assets. Last month the OCC published a proposed rule
that would increase assessments on national banks and federal savings
associations with total assets over $40 billion. The OCC 's proposal is
such: to increase the
marginal assessment rate for such institutions by 14.5% beginning
September 30, 2014; specific assessments would range from 0.32% to 14%,
depending on the total assets of the institution as reflected on its
June 30, 2014 call report.
The average increase in assessments for covered institutions would be
12%. The OCC attributes the increased assessments to new supervisory and
regulatory initiatives that require additional resources, with most of
those resources allotted for large bank supervision and regulation. The
OCC notes it did not raise marginal rates on the assets of these
institutions between 1995 and 2013, and lowered marginal rates for these
institutions in 2008 when it added a new asset bracket for assets in
excess of $250 billion. Comments on the proposed rule are due June 12,
2014.

So
how are depository institutions doing so far this year? Not as good as
they have been in years prior. According to the FDIC, ccommercial
banks and savings institutions reported aggregate net income of $37.2
billion in the first quarter of 2014, down $3.1 billion (7.6%) from
earnings of $40.3 billion the industry reported a year earlier. The
decline in earnings was mainly attributable to a 10.7% decline in
noninterest income. Despite an overall growth in loan and lease
balances, income from mortgage-related activity remained well below the
level of a year earlier. Noninterest income from the sale,
securitization and servicing of mortgages was $4.0 billion (53.6%) lower
than a year ago. One- to four-family residential real estate loans
originated and intended for sale were $323.6 billion (70.6%) lower than
in the first quarter of 2013, as rising interest rates in the second
quarter of 2013 reduced the demand for mortgage refinancings.

The Federal Deposit Insurance Corporation released April's list of orders of administrative enforcement actions
taken against banks and individuals. The FDIC issued a total of 31
orders and one notice in April; the orders included: two consent orders;
two prompt corrective action directives; eight removal and prohibition
orders; three section 19 orders; one civil money penalty; one order
amending order to pay; 14 orders terminating consent orders and cease
and desist orders; and one notice.

Turning to the markets, although
we have a decent amount of market-moving news this week, let's not
forget last week's. U.S. April personal income rose 0.3%, core PCE, the
Fed's favorite measure of inflation, increased by 0.2% month-over-month
in April (or 1.4% year-over-year), the Chicago Purchasing Manager's
Index rose to 65.5 in May from 63.0 in April. And the University of
Michigan's Consumer Confidence final May reading came in at 81.9, down
from 84.1 the month before.

But
in spite of the strong news on Friday, economic data last week showed
that this year was off to a much weaker start than many anticipated -
mostly due to the contraction of the 1st
quarter's GDP. The good news is that more recent economic data continue
to suggest a more robust pace of GDP growth in the second quarter. And
we have a lot of news this week. Today is the ISM Manufacturing Index and Construction Spending. Tomorrow the 3rd
is Factory Orders, Wednesday is the ADP Employment Change and
International Trade numbers (providing insights on trends here and
abroad), along with Nonfarm Productivity and Unit Labor Costs, and the
release of the Fed's Beige Book. Thursday
is Initial Jobless Claims. But on Friday is the "Big Daddy" in the form
of all the employment data (the unemployment rate, nonfarm payroll,
hourly earnings).

For numbers, we saw a 2.46% close on the 10-year yield on Friday. This morning we're up to 2.50%, and agency MBS prices are worse about .125.
(The Ginnie 3% coupon, which is how 3.50% FHA & VA mortgages are
priced, has a par handle - meaning it is above 100.00. But we have those
darned mortgage insurance premiums, loan level price adjustments, and
margins due to increased overhead, all serving to push borrower costs
higher.)

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